How can countries abolish their income taxes and collect even more tax revenues?
Marc Chesney, a professor at the University of Zurich, proposes an innovative way of taxation that promises to revolutionise the way governments collect taxes. More specifically, he proposes taxing every payment transaction with a microtax and abolishing other taxes on income and consumption. According to his estimation, if Switzerland charges a tax of just 0,1% of each payment transaction conducted in Switzerland, it will generate CHF 100 billion per year. In comparison, the current Swiss value-added tax brings about CHF 23 billion per year, the Swiss federal taxation regime brings about CHF 22 billion, and the stamp duly brings about CHF 2 billion. That’s in total about CHF 47 billion.
If Belgium starts charging a microtax of 0,7% on each payment transaction, the country will collect EUR 344 billion in taxes, whereas its public expenditure in 2017 was 314 billion. The microtax of 0,7% can, for example, be paid in an equal proportion (0,35%) by senders and receivers of payments.
A major advantage of the microtax is that it can be collected directly by commercial banks. This makes tax evasion difficult as the collected tax will not depend on the income declared in tax declarations. Governments, however, will need to compensate the commercial banks collecting microtaxes for their tax collecting services.
Microtaxation promises to boost the purchasing power of consumers living in the high-tax West European countries. For example, Belgium collects more than 50% of the income of its highest tax earners in the form of personal income taxes and social security contributions. If Belgium adopts microtaxation, those high-income earners will have more capacity to stimulate the Belgian economy, thus turning the country into an economic powerhouse.